Taco Bell Prevails in ERISA Worker Misclassification Suit

Based on a lack of standing, a California federal district court dismissed a former Taco Bell recruiter’s suit against the popular chain restaurant and its parent company, Yum Brands. The former recruiter had alleged that the companies had violated ERISA by intentionally misclassifying him as an independent contractor to deny him access to employee benefits, including the employee pension plan.

U.S. District Judge Philip S. Gutierrez disagreed, finding that the former recruiter lacked standing because he could not establish any entitled to vested benefits under Yum’s plans. Likewise, the judge refused to address the state law claims, including allegations of breach of contract, failure to pay timely wages, failure to reimburse expenses, and engaging in unfair, unlawful, or fraudulent business practices. The case is Tim Alders v. Yum Brands Inc. et al., case number 8:21-cv-01191, U.S. District Court for the Central District of California.

Tim Alders worked for Taco Bell as an independent contractor recruiter for 25 years, beginning in 1995. He filed suit based on his alleged misclassification as an independent contractor rather than an employee in July 2021. Alders complained that the company’s actions prevented him from enjoying employee benefits such as paid time off, health insurance, or a pension plan.

Alders argued that he met the status of an employee under the test set forth by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court (2018). Under the Dynamex test, a worker generally qualifies as an employee unless the employer can show that:

  • The worker doesn’t answer to a supervisor or the company that hired the worker,
  • The worker does work outside the scope of the company’s business, and
  • The worker can take on the same kind of work independently.

In this case, Alders pointed out that he reported to a human resources member at Yum and had a direct supervisor who assigned his work. He was required to request time off from Yum and was required to complete employee training modules. Furthermore, he was not permitted to take on outside work.

However, since Alders never actually participated in a Yum benefits plan and, in fact, claimed that Yum intentionally excluded him from the benefits plans due to misclassification, Alders had no standing to sue under ERISA. Accordingly, the judge also ruled that Alders had no colorable claim to benefits under the Yum plans.

Furthermore, the judge held that judicial economy weighed in favor of declining to exercise supplemental jurisdiction over the state law claims. Since the court had not performed any substantive analysis of those claims, the state court could perform that analysis if Alders chose to refile those claims in state court.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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